GVA - Earnings call transcript Q2 2024 | Granite Construction Incorporated

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Operator

Good day. My name is Jason, and I'll be your conference facilitator today. At this time, I would like to welcome everyone to the Granite Construction Incorporated 2024 Second Quarter Conference Call. This call is being recorded. [Operator Instructions]

pleasure Investor the Relations, my Vice over now of President Mike is to floor turn to It Barker.

Michael Barker

Executive and of presentation brief website. We Relations begin with Good joining with a morning, Please earnings Chief and Financial today available Curtis. President the us. Investor for Larkin; will note Chief that President I'm Events pleased Officer, Executive and to be and thank our on Vice regarding Officer, Kyle you non-GAAP forward-looking statements and Lisa discussion be today's and measures. Presentations page today here

of forward-looking shareholder Securities meaning projects, occurrences, opportunities, Some committed management value, the XXXX. estimates within performance, CAP, discussion demand, Act and growth, objectives, and Reform awarded targets, results. current include today These Private senior plans, statements best the the future statements circumstances, of activities, are may outcomes, reflecting regarding of events, of or strategic guidance, forward-looking the outlook, Litigation expectations judgment and

differ law. that made filings for could from statements. as update XX-Q complete of description forward-looking obligation results statements more no affect by and statements, refer factors these assumes risk today. to most required The forward-looking XX-K a materially to Actual could Granite's recent company except Please

margin, graniteconstruction.com, and disclosures company under website, Certain gross net time required include, the EBITDA of call company's adjusted are income, profit. regarding cash available earnings as may but segment to, share The discussed executives. adjusted are Relations. on presentations, our in per are non-GAAP and Materials releases our part non-GAAP and adjusted Investor included which press measures our to during adjusted measures today's EBITDA, These be earnings from time by not limited

turn to like would I Kyle Larkin. the over to Now call

Kyle Larkin

quarter and conference morning, call. our second to Good welcome

mention development an I Before vertically operations. to integrated our for work to I our quarter, and expand exciting ongoing financial results want the our discuss

Central in third and an conditions, the asphalt into customary to highway Southern acquire serving closing entered to Dickerson aggregates, Mississippi. regional we agreement and the Bowen, close construction quarter. a we leading company, Subject to week, expect This & transaction

bolt-on of XXXX also Dickerson acquisition acquisition a focused and operations. integrated & complementary Stone highly The Gravel, is Memphis to as vertically Bowen is a & our materials Lehman-Roberts

gravel plants Southeast add extending I-XX X will corridor the X to footprint and Jackson, to end pits our down asphalt our state. home the sand of acquisition and through market, Mississippi and southern The the

This our the through have we grow to investing organically purchase years. that capital continue continue as types allocation to strategy strategy. of business over strength-and-expand I core M&A vertically and integrated our continues this by Granite in for XXX operations materials-focused been expect

While we new are very geographies. our are as continually as well within evaluating selective, existing footprint opportunities in we M&A our

Now quarter. I'm let's quarter. jump the second with our pleased into strong

executing on our are plan. We

We continued to we build revenue, profitability organically and our grew increased. CAP,

focused of we we on work continue notable bar made have even on our projects and in higher execution remain to profitability. progress, to the levels we While our driving on plans as raise

levels high our achieve the year. the posted with our Construction when CAP increase increases across in construction is up allowed second for we of in businesses our Most a projects revenue segment, our of us majority prior the across the markets summer Entering of season. typically see markets geographies XX% revenue to busy In quarter over the year-over-year. ramp QX

quarter. As to dynamic the we through expect of continue transition into this the I season, construction heart third the

second for added the in XXXX. This of during and quarter is a growth, we also CAP quarter to $X.X XXXX from million million of of quarter the $XX to $XXX $X.X of an second billion. end at addition billion quarter In increase strong revenue the

period projects for second half bid the we in bid Through XXXX on the June, the quarter and that have same for exceeds robust. Our markets continue to the amount XXXX. first both be amount

in we selective very As bid, focus mentioned [indiscernible] a specific with projects that to on previously, continue be the categories. we

First, employee know that along robust with we owners, a with and markets subcontractors, already our on well. we home base vendors focused are

of XX% from in of Second, markets second at of home second million This or deliver represent the focused leverage XXXX we cap minimizing total to Best of projects quarter our larger of is are increase on from while $XX the the an projects quarter. risk. $XXX million best end relationships our where value quarter we the [indiscernible] projects our $X.X XXXX. value can billion established

projects risk. are clients contractor by project multiple value than early build into more success general packages or The design work that methods risks like assess opportunities with address us identify large and construction progressive and bid our often to us for utilized best are mitigate collaborative delivery separated in better projects. value best position allowing manager, identify, workshops. This provides through work bill smaller Larger projects reviewed to to

contracting find We have history are best compared other projects projects successful these that a value methods. and claims efficiently of and to with generally significantly fewer more constructed

this is believe we are position in for to drive Our work XXXX of I strong into market, and and a Construction XXXX. growing, that remainder win growth segment and in the

segment. Materials the to Moving

July, During announced on continued and through execute quarter. the we to last second quarter changes the organizational

drive we management and and automation such plants. in higher our levels functions, changes, as both centralized consistency quality pricing decisions in sales more and for efforts across of the control, With allowing to efficiency

teams the are across executing. Our business

just increased The seeing we that exciting is are started. profitability. already getting are news We

have the strategic to our Mississippi. continued in business, in agreement Materials focused led by the & Dickerson investments We Bowen also acquire materials

new existing segment both our Materials our vertical through to integration, is and strategy. in central markets, Growing

QX, announced site. aggregates an access the to Columbia a site via Washington riverfront barge also we will River. Also southwest lease us serve allow in into plant as the new in will It we entered that into asphalt that

support a the we aggregate plant into there. Salt booming to placed production In new City, Lake market

and expansion. M&A, We business will materials continue margin our to invest in both organically further driving through

of in average targeted both the in a discussed, asphalt. and on realizing of increases XX% Through segment. in previously and our first XXXX, increases price been has X% segment of price are As across half focus we the aggregates Materials aggregates our asphalt

the basis segment excludes gross profit Materials which also the XXXX, and and and increases of acquisitions $X XXXX profit million cash $XX We margin results, of gross Materials of margin, the effects respectively, our of year-over-year. seeing on quarter price second points these from increasing million are with profit impact and to increased second XX%. segment amortization quarter in depreciation XX% from XXX

and We results. are our executing on is strategy driving

performance turn to I'll it Now over to discuss financial our Lisa the for quarter.

Lisa Curtis

The increased half the of XXXX, of our XX%. $XXX $XXX million Adjusted the Gross million. $XX $XX In quarter with strong were ramped EBITDA projects. increase $XXX you, flow million increased work California, improved or and higher year-over-year second the The million. quarter higher continued or income segment, performance and XX%. CapEx, our cash Thank Kyle. to in of the acquisitions. also Revenue XX% up profit by primarily Construction includes million improved quarter. increased Nevada million first revenue levels $XX approximately improved of Multiple markets operating or the company $XX net Alaska. from of led levels driven CAP. teams from adjusted incremental on revenue by $XXX million. In across first And entered million, revenue increases for the XXXX, quickly The

driven The our focus XX%. was bolstered million, our segment project to profit which segment project largely by portfolio, higher-quality margin Construction in on execution. the gross with $XX by a profit increase gross transition of has improved profit gross margin been

the higher increased sales profit $X in quarter $XX increased resulting to The million. businesses XX% revenue from year-over-year increase million to profit Materials up $XXX as in led by Materials with due the was in The prices million, segment, million In sales gross in gross was to aggregates margins both $XX increased volumes. XXXX lower well as margin offsetting revenue Cash primarily increased XX% and gross acquired increase XXXX. during to asphalt. prices profit in from

Our in off. paying gains to the are the on expect and focus investments in we future. and see segment further Materials

to Turning cash.

many quarter, half strides to construction of million dynamic saw significantly period of the flow cash improvement making area. with in second seasonally up $XXX summer season. cash is XXXX, ramping flow we compared in the our or operating continued $XX lowest improved important Historically, operating projects Our for year-over-year. cash first million as quarter year the this but the We are this again of the

focus of meet the operating we key of in to a our X% at levels all performance Granite. half track our is of year, on target remain flow believe With generation cash I first the Cash revenue of XXXX. for

attractive issuance quarter During $XXX the million the executed and of interest XXXX quarter, advantage convertible X.XX market rates. convertible order positive the in the with the notes. We our take during of debt total increased note loan transaction to convertible

no of million. $XXX the facility revolver longer any have availability with credit our we transaction, on borrowings Following

sheet cash further & As and acquire we Bowen. in be strong Kyle With mentioned flexible to M&A our to our on borrowing opportunities agreement future. execute are the We announce on transaction we the cash generation, capacity, excited balance the and Dickerson plan can to hand. secured fund earlier, using

update for to guidance Now XXXX. I'll briefly our on touch an

With of the company the range. are guidance year, teams we revenue of the narrowing the the performance strong previously upper communicated the to through of first range across our the half half

both XXXX now CAP of range in expect of second entering growth remainder $X and our is revenue half further the XXXX revised the revenue With Our for to XXXX. billion $X.X organic in busy the billion. I year,

with guidance, we months There XX.X%. EBITDA of what track busiest to changes are range our believe ahead. remaining our are usually including on to guidance adjusted range We that to X.X% no our margin are meet

this is Granite as earnings it years. for thank my turn the external special I the Before well our over since all call, honored been would a have last to Kyle, across and is a like organization as last CFO Granite's I several company be to of to back I teams stakeholders.

Compared were transformed transition. with ready a more I for She excited role, the have is Granite be very closely for successor, I company. Woolsey, and Staci and only have worked we headed. is seamless will Granite years. is ago, where to X a for where my couldn't proud we years

And to it for closing remarks. Kyle now I'll back turn over

Kyle Larkin

We'll that say of can thank done we all to best Board wish and we members for behalf you team you, all the the you've Granite. Lisa. and everything in you Thanks, lead I on miss retirement. Granite

following I'll close with points. the

largely strong the high quarter, second As of of the level revenue expected, we quarter. we experienced result CAP in the into a as carried growth

growth our billion expect to billion. range $X.X to revenue our updated to We $X continue of XXXX a and guidance

budgets into across is months $X.X home our CAP supported billion markets. the testament IIJA, public in believe available and XXXX. our continued our winning geographies, the healthy experienced to the are of a coming state to build market XXXX in and remainder there work private for and us the environment I strong to of opportunities teams continue by CAP Our in

Our unchanged for margin guidance EBITDA adjusted XXXX quarter. this for is

believe segments, guidance. meet executing both we are our are on the and in We Materials and Construction track to I

are to improvement our we seeing portfolio, derisked in our ability With cash. generate

reach our flow to prior of for We ahead the of revenue XXXX. year flow, operating X% cash well cash and target expect of operating are in I of

I'm focused another the to for Bowen to reach excited This the Granite to further Dickerson important & in our will able from acquisition very Granite Southeastern materials expand that Finally, be welcome team market. is members soon.

continually We assessing to are expand strengthen further and our opportunities footprint.

and is working, I increased believe cash and will drive M&A our Our value. strategy flows shareholder

Operator, I for will to questions. you back it turn now

Operator

Our first Davidson. Instructions] Thielman comes D.A. question [Operator from Brent from

Brent Thielman

the Granite difference obviously, where today when into role. than Lisa, versus is huge you came

fantastic congrats. job, So a and

Lisa Curtis

Thank you, Brent.

Brent Thielman

I question Is bid Is guess it it And part overhang. in just in margins. overall environment of would If of It see just past you've years. of leverage Granite work it the moved talk the you you of just the around as Construction advantageous? for seems better first progress that be, more could the though advantageous? just segment. guess you're this that. of assessment added Kyle, maybe margin today like it the portfolio portfolio as has new terms looks recent your I seeing ORP really

Kyle Larkin

for Thanks, And certainly Brent. well. Lisa Yes. as thanks recognizing

mentioned in our as are we transformed a So she company. remarks,

year or we're much X better today years X last position we so ago. And were a than in certainly and

so the I today really reflects performance you're think what And that. seeing

portfolio, really profitability able a the As years type in consistent we to certainly as really quality, drive ago. it's been we risky look company. replace that's we projects allowing at the profitability and higher us pursuing that derisked, higher to have we've CAP our were of of And it's

pretty us. the We our I margins did have of and since year. we've about able this we to say would well, as raise that we environment more to bid year we been remains And a have healthy front work of last we been now extremely as able opportunities mentioned bid than and bid XXXX. strong, pipeline in do already consistently

helping company. So the the to in improve that's what highest giving we the of and CAP really CAP quality the history we've be us had believe

CAP. quality through margin beyond. XXXX and think to help We CAP, work that's drive course, progression to of this continue we and So and newer that's higher for going improved year to

Brent Thielman

of isn't off & kind just I presumably guess, is. the release chew that around Bowen it and I it be Dickerson financial may I mean guidance. sounds in details things in like could anything can But presentation find. just completed, then acquisition contribute. not acquisition here that on didn't Maybe could this I call, Because the what or we And Okay. it see any this quite

Kyle Larkin

Brent, Gravel. mean Stone first Dickerson really that that started bit. & with Yes. little And about year part having & strategy Memphis off, our last I really a and me team. Bowen platform of add business let and on it's Granite we're that just executing excited Lehman-Roberts

on. our in range million that And $XXX & so that that business, around million. narrowed $XX Dickerson we to to annual point, the your not revenue And is guidance is Bowen,

And close could $XX that, range. on around million the we expect to to that being the timing the quarter. add of So QX. depending in it

we'll at range, at And doing so timing. to the the We'll QX, progression then a look raise after take end in a our opportunity we that. we'll high if And at have take of at our look look the QX.

Operator

next Research from Ramsey question Group. The from Steven Thompson comes

Steven Ramsey

to I wishes chapter. Lisa, echo the next to best you, on the want

Lisa Curtis

you. Thank

Steven Ramsey

On to demand large West, bit, and traded Maybe with dots volumes, -- out Western checks channel slowed bit. a clearly has a start slowed rental CAP up the but demand, lower year-to-date your markets the called to your assessment In publicly for yes. a that growing, still way, in little had curious material on you, not forward. dramatic company how little a the we've that still big results done there to western focus with of looking but it's connect a shaping trying markets, and

Kyle Larkin

results. think certainly is Yes. see It private certainly I that I may in is don't on with, demand rental reconcile can perhaps And companies. see which you're to could construction be mean the to the be CAP know seeing remaining bottom more we're that I on very I residential, market how think strong. we correlated a from the line you tied side, our the certainly not side. what really

really yes, it we see still being So strong.

of disciplined, our of bidding strategy. We're taking work the we more than our through And year. We're we're mentioned, are wider still I net. As still not half year staying a it's did today because the first very focused. teams market last advantage casting home

So seeing that. not yes, necessarily we're

well. to I know up come our seemed some have continues And to California questions certainly, around market specifically. always California be strong as

Over for capital the the budget cycles now, only X projects budget seen last and assistance outlay Caltrans local increase. we've

budget certainly we're budget into that the So now. cycle continues that to increase,

really that's us. for encouraging So

actually today. If originally what they budgeted, we're you year are look allocated for which more interesting it, is pursuing they what actually than last gets at projects funds

misleading. a simply So if a just a year-over-year, it actually the you that's show it at only little bit look of little could Over increased. has but slow, budget year-over-year,

Steven Ramsey

lower do can and you pricing if and drivers, Materials then and volume operations? And the the West you has about better great. half segment, both second dynamic Southeast was talk in same that become do the both the or volumes a And the That's positive? Okay. think thinking pricing,

Kyle Larkin

of do aggregates year, course, to markets we'll been XX% Well, prices opportunities to and it's would increases on X% of to done. able things, the we say certain the that. this out certainly looking what I on have of some still to asphalt. obviously say, we and across in and get I And would year we're pricing that that, were we've see continue this raise side And still price seeing, we board. came on

to We that's we flat down this business last to relatively a year expected not healthy of board. across Last maybe kind if a flat, perspective, to the year. is that volume be was believe that bit volume our a a from relative do year perspective. and overall, aggregates year From be little going

way in and that our asphalt, the On bit on believe expected have we mostly volumes the this the up, the to still year. thought California be out market along higher and case it we asphalt to be little the a would West. We side,

is down. a So bottom it's board, flat, across the the I guess maybe bit little really actually line

anything, flat, should up. Asphalt little bit be if a

Steven Ramsey

Excellent. me. And then one last quick for one

range the yet the any to margin profile dynamic staying a QX the margin full wide? range? to talk much to or or narrow you you're how other Maybe that pretty impacts a sales $XXX so, tightening things key year pretty Can weather You're wide why million swinging there just of at it keeping range. is

Kyle Larkin

I certainly, say have in of in the be you year, confidence Yes. would do the of we'll higher a of previously of that, kind progression range. the and first look at the we that QX the growth revenue half through disclosed end lot if the

So timing narrowed in up. at we'll that's in that it depending and momentum why Bowen, the the QX. on we the look Dickerson end business, & that so deal of range of include our Again, doesn't another our top take

I We a would still as weather we're would from directionally definitely that always the or is I of in good factor the could a year. think QX. headed the range impact way it that one perspective, reflection things feel is the we #X good. say margin where other, does say that for

have expect going whether much comes to weather. or It be abnormally dry to We abnormally wet just what down or it's to pretty we some expect.

QX. in come to more So

say the execution piece is would I that we have really other to consider.

have our on opportunities and risks. we have we also projects, So

company So good used we're for be. think we news the is that us the same I not to

we've it's or of X, risk ago. do we not that execution business, seen have maybe X in years our So X although the kind risk

Operator

comes question Dudas Michael Partners. from Vertical from Research next The

Michael Dudas

Lisa. done, Well

Lisa Curtis

Thank you.

Michael Dudas

your value your Could driving you forward home markets quarters about Two mix you than on questions. the working to better markets look -- and One, best others? thoughts several through much next maybe of a business And what on on how some value. the more of mix business anticipate do Kyle, projects? you best talked maybe home the

Kyle Larkin

of So our performing home very are markets well. fortunately, all

that the I So in have, think home home terms maybe -- we're markets. just legacy with of I certainly comfortable markets that think we

those concept I think our that the maybe teams based. project for that large home have embraced certainly weren't historically market-based were

continue see we in that say, Texas. transformation, would particularly I So to

well in the shift seeing as office that Worth as paying Dallas-Fort we're our it's benefits and So Houston, off for us. of

value the with that comes pretty kind it I being of XX% of kind hang But pretty consistent of under where balance We'll to we've the see around value, it best XX%. there just around progresses over time. When best think been work our CAP. in of now close to will

more think within, I burn million. our between around we have $X balance good we smaller projects most that's get best a being risk build, And that size complex value. a some say, can broken manage contracts or -- our so, typical through we down we better of the in so XX projects and months manage projects job talk that we average that is bid

So see of I what CAP think X, I forward. the spread think it's terms be between and going you how going consistent pretty our today to it's in

Operator

Jerry Sachs. comes from question from next Revich The Goldman

Jerry Revich

congratulations. Lisa,

Lisa Curtis

you. Thank

Jerry Revich

in does don't consistent you And completely? performance? year the more cash update terms the of range this outcomes in us of in projects for just what's flow the EBITDA XXXX to prior that you the get we for updated you close as -- cash how conversion be why looking out free flow Kyle, guidance? What on expectations should folks free your as risk

Kyle Larkin

Yes.

for of cash cash X% cash the a targeting higher terms quarter. operating So nicely communicating progressing results saw We're the in company. flow that year. generating clearly, we've you as been operating really And flow quite we're in our

feel around that we very X%. I think confident So still that

of operations. has the done our of team in a nice think really care job fundamentals the I taking

positions is [indiscernible] also shifting from I continued away claims which and think is business model to these going on our drive results. help projects claim

Our CapEx just over is X% of revenue.

if it and XX% at helps. from around our X% X% that look in you and X% EBITDA the it's of around X%, conversion to So margin, to and so

we can improve. as think so we of X%. I to I get our new with forward, and think look out we things down back lot for on. were so I 'XX model, us know the Certainly, think -- 'XX, 'XX, opportunity guidance of there one just just with believe range some a to a going some targets And around or an we come I we're and higher in than deliver questions the that as targets in we XXXX, did in we there's is 'XX And we still think continue are QX business can as to QX 'XX 'XX for and

come those, QX we'll So with in around and include outlook an flow. we'll operating cash back

Jerry Revich

where contract price materials, as in can And you level it. XXXX at sourcing vertically -- just out you areas increases aggregates, integrated your are where price in Got you're for starting of materials bids that starting are construction bids for you're putting folks sort about putting work in are this what for through for you're asphalt point, Okay. and of bids work what 'XX? third-party talk increases pricing areas

Kyle Larkin

Yes.

fixed when So materials we those on to bids into the We pricing day. taking how to the get pricing. comes bid have, that it we're tend we're

get be we'll will the quotes the and might but escalators be they from third-party in contract, included have quotes those for would in, built bid. So that where firm suppliers,

price price we did we solidified yet. increases those our we for following year, year haven't increases. October. That's started And in when Last

back come to to speak increases we price can those better have we'll in So and QX. probably

Jerry Revich

for initial lastly, a obviously, Super. year-over-year and California that? But that to opportunities really high we've Are us I'm through 'XX additional is for down bids. fiscal discussed? are over takes to on the California 'XX view the discrete being higher wondering, you revised there while Can what's your be budget from levels that seen mechanisms budget And fiscal time? into funding flow step

Kyle Larkin

the higher is cycle, 'XX 'XX. current and for which the prepared original that the than budget budget in in cycle is prior budget Well, we're

because went the [indiscernible]. X is ramp-up above good mentioned, increases last happened in terms cycle see budget for a pursue allocation cycles forecasted, budgeted news projects I what build. for in to again, last and to budget of ultimately and so the budget lettings us. and they as allocated, What So consistent starting the state us is we've was over seen we're over which

create because step in was But a down. it's spike 'XX. there it the So in spending 'XX, does really only

we opportunity build see state really we we in to of in to continue CAP have and specifically. that lot healthy in front continue in our of So see us a expect markets terms to really what California, of and

Operator

our And final is Brent from a question Thielman from follow-up Davidson. D.A.

Brent Thielman

just an follow-up the mean, KPIs cash just I of think update some overall we over the like work obviously, also where peers thesis on the operations this an money here, emphasis do as that. next of profit, you to and commercial discipline just your on Kyle, a emphasis you're few business of provide on Granite? gross additional more about materials, years real putting maybe becoming for to expand that as some Maybe overall in like some past, kind strategically maybe looks seen envision

Kyle Larkin

Yes.

we teams lead that's announced that our really serve our -- across of to to geographies of materials. excellence a So business get on our couple Materials. and business, we our operational intentional. if growth things can leading up go and you remember really experts very to finding let clients to in can And better. was continued We around going construction We last national quarter, was better construction. experts the do materials how construction and focus it aligned we wanted our Construction all we ways wanted We reorganized,

to on our going functions, quality. materials allow also or digitalizing sales teams it focus say, was to really But

increases, Certainly that's drive price of one of already the cash that's the helping with primary today. that gross benefits. so seeing And you improvement profit all the we shared drivers that we're

then then the there's the continue make still within And investments. Materials opportunities And operational business. to for excellence we

business. I in are vertically value integrated vertically thing the to enhances want this really of out If a anything, is integrated we do One that is way. point only definitely -- our model

I again overall, think back want QX. we in to come So

I 'XX, help targets tell 'XX expect I line think put 'XX. you we some us growth. op bottom and for, out and to that's can again, going But is what there

We're hold you going think do. think out expect to I'm off that. there -- I on we what putting can can really we

that we're disclosures looking in I one increasing XXXX do will add things also the Materials. of around is to

our opportunity we there's to business think our around and visibility greater into an do information performance. more Materials So for really financial share give us

Operator

question-and-answer our to turn I over would remarks. the back concludes to closing like Larkin conference session. Kyle for This any

Kyle Larkin

Well, call you joining for thank Okay. the today.

do to soon. for As quarter of thank our the Granite. day you a speaking forward and of and you all great work every want year. always, in we We second look first your all for they delivering employees the half to for interest Thank with

Operator

The for attending today's conference concluded. has Thank now you presentation.

now may You disconnect.

Granite Construction (GVA) 1 Aug 242024 Q2 Earnings call transcript